I don't think this is a trackpad problem - some combinations of apps don't support dragging selected text, even with the mouse, and this seems to have changed somewhere between Mojave and Monterey.Astrorider,
I can't get my "three finger drag" to work. I think I have everything selected properly, but it's a no-go for me.
When I attempt to drag text, it looks like it works, but there's nothing in the e-mail where I drag it to.
E.g. On Mac Studio/Monterey 12.4
BBEdit -> Apple Mail (16.0) does work. (mouse or trackpad)
MS Word (16.61) -> Apple Mail not working - even with a mouse
MS Word -> Pages works.
On iMac/Mojave:
MS Word (16.54) -> Apple Mail (12.4) works fine on Mojave - with a Magic Trackpad 1
Apple apps don't seem to support dragging text out at all.